<PAGE>

                                                                      EXHIBIT 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Pamrapo Bancorp, Inc. (the "Company") owns 100% of the issued and outstanding
stock of Pamrapo Savings Bank, SLA (the "Bank"), which is the primary asset of
the Company. The Company's business is conducted principally through the Bank.


BUSINESS OF THE COMPANY

The Bank's principal business has been and continues to be attracting retail
deposits from the general public and investing those deposits, together with
funds generated from operations, primarily in one-to-four family, owner occupied
residential mortgage loans. In addition, in times of low loan demand, the Bank
will invest in mortgage-backed securities to supplement its lending portfolio.
The Bank also invests, to a lesser extent, in multi-family residential mortgage
loans, commercial real estate loans, home equity and second mortgage loans and
consumer loans.

The earnings of the Bank depend primarily upon the level of net interest income,
which is the difference between the interest earned on assets such as loans,
mortgage-backed securities, investments and other interest-earning assets and
the interest paid on liabilities such as deposits and borrowings. Net interest
income is affected by many factors, including regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit flow.
Net interest income is also affected by the amount, composition and relative
interest rates of the Bank's assets and liabilities and by the repricing of such
assets and liabilities. The Bank is vulnerable to interest rate fluctuations to
the extent that its interest-bearing liabilities mature or reprice more rapidly
than its interest-earning assets. Such asset/liability structure may result in
lower net interest income during periods of rising interest rates and may be
beneficial in times of declining interest rates. The Bank's net income is also
affected by provisions for loan losses, non-interest income, non-interest
expenses and income taxes.

FINANCIAL CONDITION

The Company's consolidated assets at December 31, 2001 totaled $539.6 million,
which represents an increase of $70.0 million or 14.90% when compared to $469.6
million at December 31, 2000, primarily due to an increase in the loans
receivable.

Securities available for sale decreased $409,000 or 7.16% to $5.3 million at
December 31, 2001 when compared with $5.7 million at December 31, 2000. The
decrease during the year ended December 31, 2001, resulted primarily from
proceeds from repayments on securities available for sale amounting to $1.1
million which offset purchases of securities available for sale of $570,000
along with unrealized gain on securities available for sale of $191,000.

Investment securities held to maturity decreased $2.0 million or 28.57% to $5.0
million at December 31, 2001 when compared with $7.0 million at December 31,
2000. The decrease during the year ended December 31, 2001 resulted primarily
from proceeds from maturities and calls of investment securities held to
maturity of $6.0 million, which offset purchases of such securities of $4.0
million.

Mortgage-backed securities held to maturity increased $3.6 million or 3.03% to
$122.4 million at December 31, 2001 from $118.8 million at December 31, 2000.
The increase during the year ended December 31, 2001 resulted primarily from
purchases of mortgage- backed securities of $34.2 million, sufficient to offset
principal repayments of $30.5 million on mortgage-backed securities.

Net loans amounted to $369.2 million and $309.1 million at December 31, 2001 and
2000, respectively, which represents an increase of $60.1 million or 19.44%,
primarily due to loan originations exceeding loan principal repayments by $60.4
million.

Foreclosed real estate amounted to $238,000 and $620,000 at December 31, 2001
and 2000, respectively. At December 31, 2001, foreclosed real estate consisted
of two properties, of which one was residential and one was commercial. The
residential property has a book value of $83,000 and is under contract for sale.
During the year ended December 31, 2001, six foreclosed properties with a book
value of $395,000 were sold by the Bank. At December 31, 2000, foreclosed real
estate consisted of seven properties, of which five were residential, one was
commercial and one was land.


                                                      PAMRAPO BANCORP, INC.   11

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Total deposits at December 31, 2001 increased $37.2 million or 9.80% to $416.6
million compared to $379.4 million at December 31, 2000.

Advances from the Federal Home Loan Bank of New York ("FHLB-NY") totaled $67.3
million and $35.6 million at December 31, 2001 and 2000, respectively. The net
increase of $31.7 million during the year ended December 31, 2001, resulted from
new advances from the FHLB-NY, which were used to fund loan commitments and for
general corporate purposes.

Stockholders' equity amounted to $47.5 million and $46.5 million at December 31,
2001 and 2000, respectively. During the years ended December 31, 2001 and 2000,
net income of $5.0 million and $4.5 million, respectively, was recorded and cash
dividends of $3.7 million and $3.6 million, respectively, were paid on the
Company's common stock. During the years ended December 31, 2001 and 2000, the
Company repurchased 20,444 and 130,187 shares, respectively, of its common stock
at prices ranging from $19.13 to $25.10 per share, for $416,000 and $2.7
million, respectively, under a stock repurchase program.


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


NET INCOME

Net income increased by $524,000 or 11.71% to $5.0 million during the year ended
December 31, 2001 compared with $4.5 million for the year ended December 31,
2000. The increase in net income during the 2001 period was primarily due to
increases in total interest income of $3.4 million and in non-interest income of
$345,000, which more than offset increases in total interest expense of $2.0
million, non-interest expenses of $645,000, provision for loan losses of
$251,000 and income taxes of $339,000.


INTEREST INCOME

Interest income on loans during the year ended December 31, 2001 increased by
$4.0 million or 17.02% to $27.5 million when compared to $23.5 million during
2000. During the years ended December 31, 2001 and 2000, the yield earned on the
loan portfolio was 8.07% and 8.27%, respectively. The average balance of loans
outstanding during the years ended December 31, 2001 and 2000, totaled $340.3
million and $284.6 million, respectively, representing an increase of $55.7
million or 19.57%.

Interest on mortgage-backed securities decreased $189,000 or 2.33% during the
year ended December 31, 2001 to $7.9 million compared to $8.1 million for 2000.
During the year ended December 31, 2001, the average balance of mortgage-backed
securities outstanding decreased $4.2 million or 3.34% to $121.6 million when
compared to $125.8 million for 2000. The yield earned on the mortgage-backed
securities portfolio was 6.52% and 6.45% during 2001 and 2000, respectively.
Interest earned on investment securities decreased by $133,000 or 18.24% to
$596,000 for the year ended December 31, 2001, when compared to $729,000 for
2000. The decrease during the year ended December 31, 2001, resulted from a
decrease of $547,000 or 5.83% in the average balance of the investment
securities portfolio, along with a decrease of one hundred and two basis points
in the yield earned on the investment securities portfolio from 7.77% in 2000 to
6.75% in 2001.

Interest on other interest-earning assets amounted to $623,000 and $780,000
during the years ended December 31, 2001 and 2000, respectively. The average
balance of other interest-earning assets outstanding increased $651,000 or 5.82%
to $11.8 million in 2001 from $11.2 million in 2000, along with a decrease of
171 basis points in the yield earned on other interest-earning assets from 6.97%
in 2000 to $5.26% in 2001.


INTEREST EXPENSE

Interest on deposits increased $1.1 million or 7.97% to $14.9 million during the
year ended December 31, 2001 compared to $13.8 million for 2000. The increase
during 2001 was attributable to an increase of $35.4 million or 10.24% in the
average balance of interest-bearing deposits outstanding partially offset by a
decrease of seven basis points in the Bank's average cost of interest-bearing
deposits from 3.98% for 2000 to 3.91% for 2001.


12   PAMRAPO BANCORP, INC.

<PAGE>

Interest on advances and other borrowed money increased $898,000 or 51.70% to
$2.6 million during the year ended December 31, 2001 compared to $1.7 million
for 2000. The increase during 2001 was attributable to an increase of $15.9
million in the average balance of advances and other borrowings outstanding,
partially offset by a decrease of eight basis points in the Bank's cost of
borrowings from 5.87% for 2000 to 5.79% for 2001.


NET INTEREST INCOME

Net interest income for the year ended December 31, 2001 increased $1.4 million
or 7.91% to $19.1 million for 2001 as compared with $17.7 million for 2000. The
Bank's net interest rate spread decreased from 3.57% in 2000 to 3.48% in 2001
and its interest rate margin decreased from 4.10% in 2000 to 3.95% in 2001. The
decreased net interest rate spread primarily resulted from an eleven basis point
decrease in the yield on average interest-earning assets to 7.59% in 2001 from
7.70% in 2000, sufficient to offset a two basis point decrease in the cost of
interest-bearing liabilities from 4.13% in 2000 to 4.11% in 2001.


PROVISION FOR LOAN LOSSES

During the years ended December 31, 2001 and 2000, the Bank provided $459,000
and $208,000, respectively, for loan losses. At December 31, 2001 and 2000, the
Bank's loan portfolio included loans totaling $3.3 million and $4.1 million,
respectively, which were delinquent ninety days or more. The Bank maintains an
allowance for loan losses based on management's evaluation of the risk inherent
in its loan portfolio which gives due consideration to changes in general market
conditions and in the nature and volume of the Bank's loan activity. The
allowance for loan losses amounted to $2.15 million at December 31, 2001,
representing .57% of total loans and 65.95% of loans delinquent ninety days or
more compared to an allowance of $1.95 million at December 31, 2000,
representing .62% of total loans and 47.74% of loans delinquent ninety days or
more. During the years ended December 31, 2001 and 2000, the Bank charged off
loans aggregating $273,000 and $268,000, respectively. The Bank monitors its
loan portfolio and intends to continue to provide for loan losses based on its
ongoing periodic review of the loan portfolio and general market conditions.


NON-INTEREST INCOME

Non-interest income increased by $345,000 or 21.89% to $1.9 million during the
year ended December 31, 2001 as compared to $1.6 million for 2000. The increase
in non-interest income during 2001 resulted primarily from increases in fees and
service charges of $173,000 and miscellaneous income of $172,000.


NON-INTEREST EXPENSES

Non-interest expenses increased $645,000 or 5.38% to $12.6 million during the
year ended December 31, 2001 compared to $12.0 million for 2000. Salaries and
employee benefits, occupancy, equipment and miscellaneous expenses increased
$32,000, $88,000, $241,000 and $443,000, respectively, during the year ended
December 31, 2001, which were partially off- set by decreases in advertising,
federal insurance premium, loss on foreclosed real estate and amortization of
intangibles of $60,000, $2,000, $36,000 and $61,000, respectively.


INCOME TAXES

Income tax expense totaled $2.9 million and $2.6 million during the years ended
December 31, 2001 and 2000, respectively. The increase in 2001 resulted
primarily from an increase in pre-tax income of $864,000.


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NET INCOME

Net income decreased by $241,000 or 5.11% to $4.5 million during the year ended
December 31, 2000 compared with $4.7 million for the year ended December 31,
1999. The decrease in net income during the 2000 period was primarily due to
increases in total interest expense of $1.9 million and in non-


                                                      PAMRAPO BANCORP, INC.   13

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


interest expenses of $525,000, which more than offset increases in total
interest income of $1.9 million and non-interest income of $11,000 and decreases
in provision for loan losses of $91,000 and income taxes of $127,000.


INTEREST INCOME

Interest income on loans during the year ended December 31, 2000 increased by
$2.0 million or 9.30% to $23.5 million when compared to $21.5 million during
1999. During the years ended December 31, 2000 and 1999, the yields earned on
the loan portfolio were 8.27% and 8.33%, respectively. The average balance of
loans outstanding during the years ended December 31, 2000 and 1999 totaled
$284.6 million and $257.4 million, respectively, representing an increase of
$27.2 million or 10.57%.

Interest on mortgage-backed securities decreased $137,000 or 1.66% during the
year ended December 31, 2000 to $8.1 million compared to $8.3 million for 1999.
During the year ended December 31, 2000, the average balance of mortgage-backed
securities outstanding decreased $2.1 million or 1.64%% to $125.8 million when
compared to $127.9 million for 1999. The yield earned on the mortgage-backed
securities portfolio remained at 6.45% during both 2000 and 1999.

Interest earned on investment securities increased by $235,000 or 47.57% to
$729,000 for the year ended December 31, 2000, when compared to $494,000 for
1999. The increase during the year ended December 31, 2000, resulted from an
increase of $2.0 million or 26.39% in the average balance of the investment
securities portfolio, along with an increase of one hundred and twelve basis
points in the yield earned on the investment securities portfolio from 6.65% in
1999 to 7.77% in 2000.

Interest on other interest-earning assets amounted to $779,000 and $1.1 million
during the years ended December 31, 2000 and 1999, respectively. The average
balance of other interest-earning assets outstanding decreased $5.3 million or
28.67% to $13.2 million in 2000 from $18.5 million in 1999 which more than
offset an increase of twenty basis points in the yield earned on other
interest-earning assets from 5.71% in 1999 to 5.91% in 2000.


INTEREST EXPENSE

Interest on deposits increased $1.8 million or 15.0% to $13.8 million during the
year ended December 31, 2000 compared to $12.0 million for 1999. The increase
during 2000 was attributable to an increase of $20.0 million or 5.99% in the
average balance of interest-bearing deposits outstanding along with an increase
of thirty-two basis points in the Bank's average cost of interest-bearing
deposits from 3.66% for 1999 to 3.98% for 2000.

Interest on advances and other borrowed money increased $48,000 or 2.84% to
$1.74 million during the year ended December 31, 2000 compared to $1.69 million
for 1999. The increase during 2000 was attributable to an increase of $735,000
in the average balance of advances and other borrowings outstanding, along with
an increase of one basis point in the Bank's cost of borrowings from 5.86% for
1999 to 5.87% for 2000.


NET INTEREST INCOME

Net interest income for the year ended December 31, 2000, increased $53,000 or
..30% to $17.66 million for 2000 as compared with $17.61 million for 1999. The
Bank's net interest rate spread decreased from 3.76% in 1999 to 3.57% in 2000
and its interest rate margin decreased from 4.28% in 1999 to 4.08% in 2000. The
decreased net interest rate spread primarily resulted from a twenty-nine basis
point increase in the cost of average interest-bearing liabilities to 4.13% in
2000 from 3.84% in 1999, sufficient to offset a ten basis point increase in the
yield on interest-earning assets from 7.60% in 1999 to 7.70% in 2000.


PROVISION FOR LOAN LOSSES

During the years ended December 31, 2000 and 1999, the Bank provided $208,000
and $299,000, respectively, for loan losses. At December 31, 2000 and 1999, the
Bank's loan portfolio included loans totaling $4.1 million and $4.2 million,
respectively, which were delinquent ninety days or more. The Bank maintains an
allowance for loan losses based on management's evaluation of the risk inherent
in its loan portfolio which gives due consideration to changes in general market
conditions and in the nature and volume of the


14   PAMRAPO BANCORP, INC.

<PAGE>


Bank's loan activity. The allowance for loan losses amounted to $1.95 million at
December 31, 2000, representing .62% of total loans and 47.74% of loans
delinquent ninety days or more compared to an allowance of $2.0 million at
December 31, 1999, representing .73% of total loans and 47.62% of loans
delinquent ninety days or more. During the years ended December 31, 2000 and
1999, the Bank charged off loans aggregating $268,000 and $604,000,
respectively. The Bank monitors its loan portfolio and intends to continue to
provide for loan losses based on its ongoing periodic review of the loan
portfolio and general market conditions.


NON-INTEREST INCOME

Non-interest income increased by $11,000 or .70% to $1.58 million during the
year ended December 31, 2000 as compared to $1.56 million for 1999. The increase
in non-interest income during 2000 resulted primarily from an increase in fees
and service charges of $26,000, offset by a decrease in miscellaneous income of
$15,000.


NON-INTEREST EXPENSES

Non-interest expenses increased $525,000 or 4.58% to $12.0 million during the
year ended December 31, 2000 compared to $11.5 million for 1999. Salaries and
employee benefits, occupancy, equipment, advertising, loss on foreclosed real
estate and miscellaneous expenses increased $322,000, $11,000, $26,000, $92,000,
$10,000 and $248,000, respectively, during the year ended December 31, 2000,
which were partially offset by decreases in federal insurance premium and
amortization of intangibles of $124,000 and $60,000, respectively.


INCOME TAXES

Income tax expense totaled $2.6 million and $2.7 million during the years ended
December 31, 2000 and 1999, respectively. The decrease in 2000 resulted
primarily from a decrease in pre-tax income of $369,000.


LIQUIDITY AND CAPITAL RESOURCES

The Bank's primary sources of funds are deposits, amortization and prepayments
of loan and mortgage-backed securities principal, FHLB-NY advances, maturities
of investment securities and funds provided from operations. While scheduled
loan and mortgage-backed securities amortization and maturities of investment
securities are a relatively predictable source of funds, deposit flows and loan
and mortgage-backed securities prepayments are greatly influenced by market
interest rates, economic conditions and competition.

The Bank is required to maintain sufficient liquidity to ensure its safe and
sound operation by the Office of Thrift Supervision ("OTS") regulations. The
Bank's liquidity averaged 8.39% during December, 2001. The Bank adjusts its
liquidity levels in order to meet funding needs for deposit outflows, payments
of real estate taxes from escrow accounts on mortgage loans, repayment of
borrowings, when applicable, and loan funding commitments. The Bank also adjusts
its liquidity level as appropriate to meet its asset/liability objectives. In
addition, the Bank invests its excess funds in federal funds and overnight
deposits with the FHLB-NY, which provides liquidity to meet lending
requirements.

The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating, investing and financing activities. Cash was generated by
operating activities in each of the above periods. The primary source of cash
from operating activities during each period was net income.

The primary sources of investing activities of the Bank are lending and
investment in mortgage-backed securities. In addition to funding new loan
production and the purchase of mortgage-backed securities through operations and
financing activities, new loan production and the purchase of mortgage-backed
securities were also funded by principal repayments on existing loans and
mortgage-backed securities. The primary sources of financing activities during
the 2001 period were net increases in deposits of $37.2 million and net advances
from the FHLB-NY of $31.8 million.


                                                      PAMRAPO BANCORP, INC.   15

<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS  (continued)

Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments,
such as federal funds and interest-earning deposits. If the Bank requires funds
beyond its ability to generate them internally, borrowing agreements exist with
the FHLB-NY, which provide an additional source of funds. At December 31, 2001
and 2000, advances from the FHLB-NY amounted to $67.3 million and $35.6 million,
respectively.

The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At December 31, 2001, the Bank has outstanding
commitments to originate loans of $27.1 million and to purchase mortgage-backed
securities of $5.9 million. Certificates of deposit scheduled to mature in one
year or less, at December 31, 2001, totaled $164.0 million. Management believes
that, based upon historical experience, a significant portion of such deposits
will remain with the Bank.

At December 31, 2001, the Bank exceeded each of the three OTS capital
requirements. The Bank's tangible, core and risk-based capital ratios were
7.26%, 7.26% and 14.43%, respectively. The Bank was categorized as
"well-capitalized" under the prompt corrective action regulations of the OTS.


IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements and the related data presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of
the Bank are monetary in nature. As a result, interest rates have a more
significant impact on the Bank's performance than the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services because such prices are
affected by inflation to a larger extent than interest rates.


16   PAMRAPO BANCORP, INC.

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>

                                                                                                              DECEMBER 31,
                                                                                                 --------------------------------
Assets                                                                              Note(s)               2000             2001
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>               <C>              <C>
Cash and amounts due from depository institutions                                                $  12,553,854    $  22,688,885
Interest-bearing deposits in other banks                                                             1,700,000               --
---------------------------------------------------------------------------------------------------------------------------------
      Total cash and cash equivalents                                               1 and 16        14,253,854       22,688,885

Securities available for sale                                                     1,2,9 and 16       5,713,206        5,304,032
Investment securities held to maturity                                            1,3,9 and 16       6,996,297        5,000,000
Mortgage-backed securities held to maturity                                       1,4,9 and 16     118,791,206      122,417,611
Loans receivable                                                                  1,5,9 and 16     309,082,076      369,238,574
Foreclosed real estate                                                                  1              620,072          238,141
Investment in real estate                                                               1              240,998          227,033
Premises and equipment                                                             1,6 and 10        5,042,595        4,830,735
Federal Home Loan Bank of New York stock                                                9            3,496,200        3,796,100
Interest receivable                                                                1,7 and 16        2,765,984        2,944,226
Deferred tax asset                                                                  1 and 14         1,263,983        1,221,402
Other assets                                                                                         1,291,777        1,732,103
---------------------------------------------------------------------------------------------------------------------------------
      Total assets                                                                               $ 469,558,248    $ 539,638,842
=================================================================================================================================

                                                                                                              DECEMBER 31,
                                                                                                 --------------------------------
Liabilities and stockholders' equity                                                Note(s)               2000             2001
---------------------------------------------------------------------------------------------------------------------------------
Liabilities
---------------------------------------------------------------------------------------------------------------------------------
Deposits                                                                            8 and 16     $ 379,409,856    $ 416,586,795
Advances from Federal Home Loan Bank of New York                                    9 and 16        35,583,100       67,340,000
Other borrowed money                                                               10 and 16           204,962          178,176
Advance payments by borrowers for taxes and insurance                                                2,531,694        3,516,532
Other liabilities                                                                      13            5,300,127        4,494,164
---------------------------------------------------------------------------------------------------------------------------------
      Total liabilities                                                                            423,029,739      492,115,667
---------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies                                                      15 and 16                --               --
Stockholders' equity                                                           1,11,12,13 and 14
---------------------------------------------------------------------------------------------------------------------------------
Preferred stock; authorized 3,000,000 shares; issued and outstanding - none                                 --               --
Common stock; par value $.01; authorized 7,000,000 shares;
   shares issued 3,450,000; 2,597,737 shares and 2,577,293
   shares respectively, outstanding                                                                     34,500           34,500
Paid-in capital in excess of par value                                                              18,906,768       18,906,768
Retained earnings - substantially restricted                                                        46,332,436       47,621,056
Accumulated other comprehensive income -
   Unrealized gain on securities available for sale, net of income tax                                  73,593          195,784
Treasury stock, at cost; 852,263 shares and 872,707
   shares, respectively                                                                            (18,818,788)     (19,234,933)
---------------------------------------------------------------------------------------------------------------------------------
      Total stockholders' equity                                                                    46,528,509       47,523,175
---------------------------------------------------------------------------------------------------------------------------------
      Total liabilities and stockholders' equity                                                 $ 469,558,248    $ 539,638,842
=================================================================================================================================
</TABLE>

See notes to consolidated financial statements.

                                                      PAMRAPO BANCORP, INC.   17

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                   --------------------------------------------
                                                         Note(s)             1999          2000          2001
---------------------------------------------------------------------------------------------------------------
<S>                                                      <C>          <C>           <C>           <C>
Interest income:
   Loans                                                 1 and 5      $21,452,872   $23,539,700   $27,480,276
   Mortgage-backed securities                               1           8,250,602     8,113,734     7,924,810
   Investments                                              1             494,074       728,837       596,371
   Other interest-earning assets                                        1,055,161       779,848       623,336
---------------------------------------------------------------------------------------------------------------
      Total interest income                                            31,252,709    33,162,119    36,624,793
---------------------------------------------------------------------------------------------------------------
Interest expense:
   Deposits                                                 8          11,953,248    13,760,987    14,908,910
   Advances and other borrowed money                                    1,688,590     1,736,695     2,635,383
---------------------------------------------------------------------------------------------------------------
      Total interest expense                                           13,641,838    15,497,682    17,544,293
---------------------------------------------------------------------------------------------------------------
Net interest income                                                    17,610,871    17,664,437    19,080,500
Provision for loan losses                                1 and 5          298,531       207,879       458,888
---------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses                    17,312,340    17,456,558    18,621,612
---------------------------------------------------------------------------------------------------------------
Non-interest income:
   Fees and service charges                                             1,001,162     1,027,426     1,200,562
   Miscellaneous                                                          563,658       548,837       720,554
---------------------------------------------------------------------------------------------------------------
      Total non-interest income                                         1,564,820     1,576,263     1,921,116
---------------------------------------------------------------------------------------------------------------
Non-interest expenses:
   Salaries and employee benefits                          13           6,075,920     6,398,237     6,430,140
   Net occupancy expense of premises                    6 and 15        1,107,805     1,118,931     1,206,893
   Equipment                                                6           1,088,113     1,113,677     1,354,638
   Advertising                                                            202,425       294,275       233,745
   Federal insurance premium                                              199,446        75,579        74,314
   Loss on foreclosed real estate                           1              33,297        42,875         7,242
   Amortization of intangibles                              1             121,300        60,649            --
   Miscellaneous                                                        2,635,983     2,884,329     3,327,375
---------------------------------------------------------------------------------------------------------------
      Total non-interest expenses                                      11,464,289    11,988,552    12,634,347
---------------------------------------------------------------------------------------------------------------
Income before income taxes                                              7,412,871     7,044,269     7,908,381
Income taxes                                            1 and 14        2,695,937     2,568,659     2,907,980
---------------------------------------------------------------------------------------------------------------
Net income                                                            $ 4,716,934   $ 4,475,610   $ 5,000,401
===============================================================================================================
Basic/diluted earnings per common share                     1         $      1.70   $      1.70   $      1.94
===============================================================================================================
Weighted average number of common shares outstanding:
   Basic/diluted                                                        2,766,916     2,632,265     2,580,173
===============================================================================================================
Dividends per common share                                  1         $      1.25   $      1.38   $      1.44
===============================================================================================================
</TABLE>

See notes to consolidated financial statements.


18   PAMRAPO BANCORP, INC.

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>

                                                                                       Year Ended December 31,
                                                                         --------------------------------------------
                                                                                  1999           2000          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>           <C>
Net income                                                                 $ 4,716,934    $ 4,475,610   $ 5,000,401
---------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of income taxes (benefit):
   Gross unrealized holding gain (loss) on securities available for sale      (135,389)       188,167       191,091
   Deferred income taxes (benefit)                                             (48,800)        67,700        68,900
---------------------------------------------------------------------------------------------------------------------
   Other comprehensive income (loss)                                           (86,589)       120,467       122,191
---------------------------------------------------------------------------------------------------------------------
Comprehensive income                                                       $ 4,630,345    $ 4,596,077   $ 5,122,592
=====================================================================================================================
</TABLE>

See notes to consolidated financial statements.


                                                      PAMRAPO BANCORP, INC.   19

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                Paid-in       Retained    Accumulated
                                                             Capital in     Earnings -          Other
                                                   Common     Excess of  Substantially  Comprehensive       Treasury
                                                    Stock     Par Value     Restricted         Income          Stock          Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>            <C>            <C>            <C>            <C>
Balance - December 31, 1998                  $     34,500  $ 18,906,768   $ 44,217,856   $     39,715   $(13,425,934)  $ 49,772,905
Net income for the year ended
   December 31, 1999                                   --            --      4,716,934             --             --      4,716,934
Purchase of treasury stock                             --            --             --             --     (2,689,379)    (2,689,379)
Unrealized loss on securities available
   for sale, net of income taxes (benefit)             --            --             --        (86,589)            --        (86,589)
Cash dividends                                         --            --     (3,459,907)            --             --     (3,459,907)
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999                        34,500    18,906,768     45,474,883        (46,874)   (16,115,313)    48,253,964
Net income for the year ended
   December 31, 2000                                   --            --      4,475,610             --             --      4,475,610
Purchase of treasury stock                             --            --             --             --     (2,703,475)    (2,703,475)
Unrealized gain on securities
   available for sale, net of income taxes             --            --             --        120,467             --        120,467
Cash dividends                                         --            --     (3,618,057)            --             --     (3,618,057)
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2000                        34,500    18,906,768     46,332,436         73,593    (18,818,788)    46,528,509
Net income for the year ended
   December 31, 2001                                   --            --      5,000,401             --             --      5,000,401
Purchase of treasury stock                             --            --             --             --       (416,145)      (416,145)
Unrealized gain on securities
   available for sale, net of income taxes             --            --             --        122,191             --        122,191
Cash dividends                                         --            --     (3,711,781)            --             --     (3,711,781)
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2001                  $     34,500  $ 18,906,768   $ 47,621,056   $    195,784   $(19,234,933)  $ 47,523,175
====================================================================================================================================
</TABLE>

See notes to consolidated financial statements.


20   PAMRAPO BANCORP, INC.

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              Year Ended December 31,
                                                                                  ----------------------------------------------
                                                                                          1999            2000            2001
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>             <C>             <C>
Cash flows from operating activities:
   Net income                                                                     $  4,716,934    $  4,475,610    $  5,000,401
   Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation of premises and equipment and investment in real estate              616,523         575,508         584,996
     Accretion of deferred fees, premiums and discounts, net                           (25,364)         (7,106)         (7,895)
     Provision for loan losses                                                         298,531         207,879         458,888
     Provision for losses on foreclosed real estate                                     60,000          13,500          20,037
     (Gain) loss on sale of foreclosed real estate                                     (44,966)          2,873         (34,359)
     Deferred income taxes (benefit)                                                   (26,586)        (18,671)        (26,319)
     (Increase) in interest receivable                                                (189,568)       (212,076)       (178,242)
     Decrease (increase) in other assets                                               207,768        (216,459)       (440,326)
     Amortization of intangibles                                                       121,300          60,649              --
     (Decrease) increase in other liabilities                                       (1,886,889)      1,217,743        (805,963)
--------------------------------------------------------------------------------------------------------------------------------

      Net cash provided by operating activities                                      3,847,683       6,099,450       4,571,218
--------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
   Proceeds from maturities and calls of securities available for sale               2,000,000              --              --
   Principal repayments on securities available for sale                             1,113,012         949,784       1,081,230
   Purchases of securities available for sale                                          (64,604)        (81,087)       (570,385)
   Proceeds from maturities and calls of investment securities held to maturity      2,000,000       2,000,000       6,000,000
   Purchases of investment securities held to maturity                              (7,997,500)     (1,000,000)     (4,000,000)
   Principal repayments on mortgage-backed securities held to maturity              29,377,328      18,037,553      30,463,577
   Purchases of mortgage-backed securities held to maturity                        (30,035,520)    (16,217,257)    (34,155,728)
   Proceeds from sales of student loans                                                104,919         116,730              --
   Purchases of mortgage loans                                                        (131,000)     (1,675,900)             --
   Net change in loans receivable                                                  (28,782,339)    (39,418,857)    (60,394,792)
   Proceeds from sales of foreclosed real estate                                       304,117          42,127         335,017
   Additions to premises and equipment                                                (377,899)     (1,131,746)       (359,171)
   Purchase of Federal Home Loan Bank of of New York stock                            (146,000)       (253,000)       (299,900)
--------------------------------------------------------------------------------------------------------------------------------
      Net cash (used in) investing activities                                      (32,635,486)    (38,631,653)    (61,900,152)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.


                                                      PAMRAPO BANCORP, INC.   21

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

<TABLE>
<CAPTION>
                                                                                            Year Ended December 31,
                                                                              ------------------------------------------------
                                                                                       1999            2000            2001
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>             <C>
Cash flows from financing activities:
   Net increase in deposits                                                    $ 35,939,385    $ 17,485,188    $ 37,176,939
   Advances from Federal Home Loan Bank of New York                               5,000,000      15,000,000      32,000,000
   Repayment of Advances from Federal Home Loan Bank of New York                 (3,000,000)    (10,000,000)       (243,100)
   Repayment of other borrowed money                                                (22,839)        (24,734)        (26,786)
   Net increase (decrease) in payments by borrowers for
      taxes and insurance                                                            35,578        (414,945)        984,838
   Cash dividends paid                                                           (3,459,907)     (3,618,057)     (3,711,781)
   Purchase of treasury stock                                                    (2,689,379)     (2,703,475)       (416,145)
------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by financing activities                               31,802,838      15,723,977      65,763,965
------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                              3,015,035     (16,808,226)      8,435,031
Cash and cash equivalents - beginning                                            28,047,045      31,062,080      14,253,854
------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - ending                                             $ 31,062,080    $ 14,253,854    $ 22,688,885
==============================================================================================================================
Supplemental information:
        Transfer of loans receivable to foreclosed real estate                 $    205,000    $    222,376    $     33,264
==============================================================================================================================
        Loans to facilitate sales of foreclosed real estate                    $    666,750    $         --    $     94,500
==============================================================================================================================
        Cash paid during the period for:
           Income taxes                                                        $  2,457,745    $  2,560,380    $  2,775,334
==============================================================================================================================
           Interest on deposits and borrowings                                 $ 13,666,460    $ 15,395,662    $ 17,455,832
==============================================================================================================================
</TABLE>

See notes to consolidated financial statements.


22   PAMRAPO BANCORP, INC.

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary, Pamrapo Savings Bank, S.L.A. (the "Bank") and the
Bank's wholly owned subsidiary, Pamrapo Service Corp., Inc. (the "Service
Corp."). The Company's business is conducted principally through the Bank. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America
("GAAP"). In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the consolidated statement of financial
condition and revenues and expenses for the period then ended. Actual results
could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant changes relate to the determination of
the allowance for loan losses, the assessment of prepayment risks associated
with mortgage-backed securities and the determination of the amount of deferred
tax assets which are more likely than not to be realized. Management believes
that the allowance for loan losses is adequate, prepayment risks associated with
mortgage-backed securities are properly recognized and all deferred tax assets
are more likely than not to be recognized. While management uses available
information to recognize losses on loans, future additions to the allowance for
loan losses may be necessary based on changes in economic conditions in the
market area. Additionally, assessments of prepayment risks related to
mortgage-backed securities are based upon current market conditions, which are
subject to frequent change. Finally, the determination of the amount of deferred
tax assets more likely than not to be realized is dependent on projections of
future earnings, which are subject to frequent change.

In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to recognize additions to the allowance for
loan losses based on their judgments about information available to them at the
time of their examination.


CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and amounts due from depository
institutions and interest-bearing deposits in other banks having original
maturities of three months or less.


INVESTMENT AND MORTGAGE-BACKED SECURITIES

Investments in debt securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity securities and
reported at amortized cost. Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized holding gains and
losses included in earnings. Debt and equity securities not classified as
trading securities nor as held-to-maturity securities are classified as
available for sale securities and reported at fair value, with unrealized
holding gains or losses, net of deferred income taxes, reported in a separate
component of stockholders' equity.

Premiums and discounts on all securities are amortized/accreted using the
interest method. Interest and dividend income on securities, which includes
amortization of premiums and accretion of discounts, is recognized in the
consolidated financial statements when earned. The adjusted cost basis of an
identified security sold or called is used for determining security gains and
losses recognized in the consolidated statements of income.


                                                      PAMRAPO BANCORP, INC.   23

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


LOANS RECEIVABLE

Loans receivable are stated at unpaid principal balances, less the allowance for
loan losses and net deferred loan origination fees and discounts.

The Bank defers loan origination fees and certain direct loan origination costs
and accretes such amounts as an adjustment of yield over the contractual lives
of the related loans. Discounts on loans purchased are recognized as income by
use of the level-yield method over the terms of the respective loans.

Uncollectible interest on loans is charged off, or an allowance is established
based on management's evaluation. An allowance is established by a charge to
interest income equal to all interest previously accrued, and income is
subsequently recognized only to the extent that cash payments are received
until, in management's judgment, the borrower's ability to make periodic
interest and principal payments is probable, in which case the loan is returned
to an accrual status.


ALLOWANCE FOR LOAN LOSSES

An allowance for loan losses is maintained at a level considered adequate to
absorb loan losses. Management of the Bank, in determining the allowance for
loan losses, considers the risks inherent in its loan portfolio and changes in
the nature and volume of its loan activities, along with the general economic
and real estate market conditions.

The Bank utilizes a two tier approach: (1) identification of impaired loans and
the establishment of specific loss allowances, if necessary, on such loans; and
(2) establishment of general valuation allowances on the remainder of its loan
portfolio. The Bank maintains a loan review system which allows for a periodic
review of its loan portfolio and the early identification of potential impaired
loans. Such system takes into consideration, among other things, delinquency
status, size of loans, type of collateral and financial condition of the
borrowers. Specific loan loss allowances are established for identified loans
based on a review of such information and/or appraisals of the underlying
collateral. General loan loss allowances are based upon a combination of factors
including, but not limited to, actual loan loss experience, composition of loan
portfolio, current economic conditions and management's judgment.

Although management believes that adequate specific and general loan loss
allowances are established, actual losses are dependent upon future events and,
as such, further additions to the allowance for loan losses may be necessary.

An impaired loan is evaluated based on the present value of expected future cash
flows discounted at the loan's effective interest rate, or as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan evaluated for impairment
is deemed to be impaired when, based on current information and events, it is
probable that the Bank will be unable to collect all amounts due according to
the contractual terms of the loan agreement. An insignificant payment delay,
which is defined as up to ninety days by the Bank, will not cause a loan to be
classified as impaired. A loan is not impaired during a period of delay in
payment if the Bank expects to collect all amounts due, including interest
accrued at the contractual interest rate for the period of delay. Thus, a demand
loan or other loan with no stated maturity is not impaired if the Bank expects
to collect all amounts due, including interest accrued at the contractual
interest rate, during the period the loan is outstanding. All loans identified
as impaired are evaluated independently. The Bank does not aggregate such loans
for evaluation purposes. Payments received on impaired loans are applied first
to accrued interest receivable and then to principal.


FORECLOSED REAL ESTATE AND INVESTMENT IN REAL ESTATE

Real estate acquired by foreclosure or deed in lieu of foreclosure is initially
recorded at the lower of cost or estimated fair value at date of acquisition and
subsequently carried at the lower of such initially recorded amount or estimated
fair value less estimated costs to sell. Costs incurred in developing or
preparing properties for sale are capitalized. Expenses of holding properties
and income from operating properties are recorded in operations as incurred or
earned. Gains and losses from sales of such properties are recognized as
incurred.


24   PAMRAPO BANCORP, INC.

<PAGE>


Real estate held for investment is carried at cost less accumulated
depreciation. Income and expense of operating the property are recorded in
operations.


PREMISES AND EQUIPMENT

Premises and equipment are comprised of land, at cost, and buildings, building
improvements, leaseholds and furnishings and equipment, at cost, less
accumulated depreciation and amortization. Significant renewals and betterments
are charged to the property and equipment account. Maintenance and repairs are
expensed in the year incurred. Rental income is netted against occupancy expense
in the consolidated statements of income.


INCOME TAXES

The Company, Bank and Service Corp. file a consolidated federal income tax
return. Income taxes are allocated to the Company, Bank and Service Corp. based
on their respective income or loss included in the consolidated income tax
return. Separate state income tax returns are filed by the Company, Bank and
Service Corp.

Federal and state income taxes have been provided on the basis of reported
income. The amounts reflected on the Company's and subsidiaries' tax returns
differ from these provisions due principally to temporary differences in the
reporting of certain items for financial reporting and income tax reporting
purposes.

Deferred income tax expense or benefit is determined by recognizing deferred tax
assets and liabilities for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in earnings in the period that includes the
enactment date. The realization of deferred tax assets is assessed and a
valuation allowance provided, when necessary, for that portion of the asset
which is not likely to be realized. Management believes, based upon current
facts, that it is more likely than not that there will be sufficient taxable
income in future years to realize the deferred tax assets.


IMPACT OF NEW FINANCIAL ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 applies to
all business combinations completed after June 30, 2001 and requires the use of
the purchase method of accounting. SFAS No. 141 also establishes new criteria
for determining whether intangible assets should be recognized separately from
goodwill. SFAS No. 142 provides that goodwill and intangible assets with
indefinite lives will not be amortized, but rather will be tested for impairment
on at least an annual basis. The Company adopted SFAS No. 142 on January 1,
2002. The scope of SFAS No. 142 does not include unidentifiable intangible
assets related to acquisitions of banks, savings banks, credit unions, other
financial institutions having assets and liabilities of similar type, and
branches of such enterprises. Such unidentifiable intangible assets will
continue to be governed by SFAS No. 72, "Accounting for Certain Acquisitions of
Banking or Thrift Institutions." Adoption of SFAS No. 142 did not have a
material impact on the Company's consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This standard sets forth for the accounting for
the impairment of long-lived assets, whether they are held and used or are
disposed of by sale or other means. It also broadens and modifies the
presentation of discontinued operations. The standard will be effective for the
Company's fiscal year 2002, although early adoption is permitted, and its
provisions are generally to be applied prospectively. The Company does not
believe SFAS No. 144 will have a material impact on its consolidated financial
statements.


                                                      PAMRAPO BANCORP, INC.   25

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


INTEREST-RATE RISK

The Bank is principally engaged in the business of attracting deposits from the
general public and using these deposits, together with borrowings and other
funds, to invest in securities, to make loans secured by real estate and, to a
lesser extent, make consumer loans. The potential for interest-rate risk exists
as a result of the generally shorter duration of the Bank's interest-sensitive
liabilities compared to the generally longer duration of its interest-sensitive
assets. In a rising interest rate environment, liabilities will reprice faster
than assets, thereby reducing net interest income. For this reason, management
regularly monitors the maturity structure of the Bank's assets and liabilities
in order to measure its level of interest-rate risk and to plan for future
volatility.


DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used in estimating the fair value of
financial instruments:

Cash and cash equivalents and interest receivable: The carrying amounts reported
in the consolidated financial statements for cash and cash equivalents and
interest receivable approximate their fair values.

Securities: The fair value of securities, as well as commitments to purchase
securities, is determined by reference to quoted market prices, where available.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.

Loans receivable: Fair value is estimated by discounting the future cash flows,
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities, of such loans.

Deposits: The carrying amounts reported in the consolidated financial statements
for non-interest-bearing demand, NOW, Money Market, savings and club accounts
approximate their fair values. For fixed-maturity certificates of deposit, fair
value is estimated using the rates currently offered for deposits of similar
remaining maturities.

Advances from Federal Home Loan Bank of New York and other borrowed money: Fair
value is estimated using rates currently offered for liabilities of similar
remaining maturities, or when available, quoted market prices.

Commitments to extend credit: The fair value of commitments is estimated using
the fees currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates.


EXCESS OF COST OVER ASSETS ACQUIRED

The cost in excess of the fair value of net assets (goodwill) acquired through
the acquisition of certain assets and assumption of certain liabilities of
branch offices was amortized to expense over a ten year period by use of the
straight-line method.


NET INCOME PER COMMON SHARE

Basic net income per common share is based on the weighted average number of
common shares actually outstanding. Diluted net income per share is calcu- lated
by adjusting the weighted average number of shares of common stock outstanding
to include the effect of stock options, if dilutive, using the treasury stock
method. During the years ended December 31, 1999, 2000 and 2001, there were no
outstanding securities or contracts that could have been dilutive.


RECLASSIFICATION

Certain amounts for prior periods have been reclassified to conform to the
current period's presentation.


26   PAMRAPO BANCORP, INC.

<PAGE>


2.   SECURITIES AVAILABLE FOR SALE

<TABLE>
<CAPTION>
                                                                                       December 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
                                                                                        Gross Unrealized
                                                                      Amortized    ----------------------------        Carrying
                                                                           Cost           Gains          Losses           Value
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>             <C>             <C>
Mortgage-backed securities                                         $  4,263,351    $        272    $     90,839    $  4,172,784

Mutual funds                                                          1,327,942              --           1,720       1,326,222

Equity security                                                           7,020         207,180              --         214,200
---------------------------------------------------------------------------------------------------------------------------------
                                                                   $  5,598,313    $    207,452    $     92,559    $  5,713,206
=================================================================================================================================


                                                                                       December 31, 2001
---------------------------------------------------------------------------------------------------------------------------------
                                                                                        Gross Unrealized
                                                                      Amortized    ----------------------------        Carrying
                                                                           Cost           Gains          Losses           Value
---------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities                                         $  3,092,701    $     45,986    $         --    $  3,138,687

Mutual funds                                                          1,398,327              --           1,045       1,397,282

Trust originated preferred security, maturing after twenty years        500,000           3,400              --         503,400

Equity security                                                           7,020         257,643              --         264,663
---------------------------------------------------------------------------------------------------------------------------------
                                                                   $  4,998,048    $    307,029    $      1,045    $  5,304,032
=================================================================================================================================
</TABLE>

There were no sales of securities available for sale during the years ended
December 31, 1999, 2000 and 2001.


3.   INVESTMENT SECURITIES HELD TO MATURITY

<TABLE>
<CAPTION>
                                                                                         December 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
                                                                                          Gross Unrealized              Estimated
                                                                      Amortized    ----------------------------           Fair
                                                                           Cost           Gains          Losses           Value
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>             <C>             <C>
U.S. Government (including agencies):

      Due after five through ten years                             $  1,997,726    $         --    $     33,351    $  1,964,375

      Due after ten years                                             3,998,571              --          61,696       3,936,875
---------------------------------------------------------------------------------------------------------------------------------
                                                                      5,996,297              --          95,047       5,901,250

Subordinated note due after five

   through ten years                                                  1,000,000              --          15,000         985,000
---------------------------------------------------------------------------------------------------------------------------------
                                                                   $  6,996,297    $         --    $    110,047    $  6,886,250
=================================================================================================================================


                                                                                         December 31, 2001
---------------------------------------------------------------------------------------------------------------------------------
                                                                                          Gross Unrealized              Estimated
                                                                      Amortized    ----------------------------           Fair
                                                                           Cost           Gains          Losses           Value
---------------------------------------------------------------------------------------------------------------------------------
U.S. Government (including agencies):

      Due after five through ten years                             $  2,000,000    $     12,500    $         --    $  2,012,500

Subordinated notes due after five

   through ten years                                                  3,000,000          35,000          30,307       3,004,693
---------------------------------------------------------------------------------------------------------------------------------
                                                                   $  5,000,000    $     47,500    $     30,307    $  5,017,193
=================================================================================================================================
</TABLE>

There were no sales of investment securities held to maturity during the years
ended December 31, 1999, 2000 and 2001.


                                                      PAMRAPO BANCORP, INC.   27

<PAGE>


PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


4.   MORTGAGE-BACKED SECURITIES HELD TO MATURITY

<TABLE>
<CAPTION>
                                                                          December 31, 2000
----------------------------------------------------------------------------------------------------------------
                                                                           Gross Unrealized            Estimated
                                                        Amortized   ----------------------------         Fair
                                                             Cost          Gains         Losses          Value
----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>            <C>            <C>
Federal Home Loan Mortgage Corporation               $ 90,338,727   $    802,679   $    337,970   $ 90,803,436

Federal National Mortgage Association                  25,630,266        228,606        157,970     25,700,902

Government National Mortgage Association                2,822,213          1,987            717      2,823,483
----------------------------------------------------------------------------------------------------------------
                                                     $118,791,206   $  1,033,272   $    496,657   $119,327,821
================================================================================================================


                                                                           December 31, 2001
----------------------------------------------------------------------------------------------------------------
                                                                           Gross Unrealized            Estimated
                                                        Amortized   ----------------------------      Carrying
                                                             Cost          Gains         Losses          Value
----------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation               $ 79,433,582   $  1,820,697   $    209,129   $ 81,045,150

Federal National Mortgage Association                  40,922,509        487,066         16,372     41,393,203

Government National Mortgage Association                2,061,520         77,903             --      2,139,423
----------------------------------------------------------------------------------------------------------------
                                                     $122,417,611   $  2,385,666   $    225,501   $124,577,776
================================================================================================================
</TABLE>

There were no sales of mortgage-backed securities held to maturity during the
years ended December 31, 1999, 2000 and 2001.


28   PAMRAPO BANCORP, INC.

<PAGE>


5.   LOANS RECEIVABLE

                                              December 31,
-----------------------------------------------------------------
                                             2000           2001
-----------------------------------------------------------------
Real estate mortgage:
    One-to-four family               $181,545,069   $230,374,470
    Multi-family                       41,509,822     44,616,664
    Commercial                         23,171,991     28,258,043
    FHA insured and VA
        guaranteed                        441,841        285,891
-----------------------------------------------------------------
                                      246,668,723    303,535,068
-----------------------------------------------------------------
Real estate construction                9,128,388      7,067,870
-----------------------------------------------------------------
Land                                    1,465,921      1,403,441
-----------------------------------------------------------------
Commercial                                927,789      1,262,477
-----------------------------------------------------------------
Consumer:
    Passbook or certificate               691,041        688,520
    Home improvement                      560,658        575,917
    Equity and second
        mortgage                       52,255,537     56,958,107
    Automobile                          1,544,630      1,484,381
    Personal                            1,785,476      1,293,763
-----------------------------------------------------------------
                                       56,837,342     61,000,688
-----------------------------------------------------------------
    Total                             315,028,163    374,269,544
-----------------------------------------------------------------
Less:
    Loans in process                    2,925,034      2,271,587
    Allowance for
        loan losses                     1,950,000      2,150,000
    Deferred loan fees
        and discounts                   1,071,053        609,383
-----------------------------------------------------------------
                                        5,946,087      5,030,970
-----------------------------------------------------------------
                                     $309,082,076   $369,238,574
=================================================================

At December 31, 1999, 2000 and 2001, loans serviced by the Bank for the benefit
of others totalled approximately $2,919,000, $2,249,000 and $1,584,000,
respectively.

At December 31, 1999, 2000 and 2001, nonaccrual loans for which interest has
been discontinued totalled approximately $3,130,000, $2,703,000, and $2,256,000
respectively. During the years ended December 31, 1999, 2000 and 2001, the Bank
recognized interest income of approximately $115,000, $71,000 and $88,000
respectively, on these loans. Interest income that would have been recorded, had
the loans been on the accrual status, would have amounted to approximately
$297,000, $270,000 and $230,000 for the years ended December 31, 1999, 2000 and
2001, respectively. The Bank is not committed to lend additional funds to the
borrowers whose loans have been placed on nonaccrual status.

The following is an analysis of the allowance for loan losses:

                                              Year Ended December 31,
-----------------------------------------------------------------------------
                                        1999           2000           2001
-----------------------------------------------------------------------------
Balance, beginning               $ 2,300,000    $ 2,000,000    $ 1,950,000
Provisions charged
    to operations                    298,531        207,879        458,888
Recoveries credited
    to allowance                       5,062          9,860         14,432
Loan losses charged
    to allowance                    (603,593)      (267,739)      (273,320)
-----------------------------------------------------------------------------
Balance, ending                  $ 2,000,000    $ 1,950,000    $ 2,150,000
=============================================================================

Impaired loans and related amounts recorded in the allowance for loan losses are
summarized as follows:

                                                    December 31,
------------------------------------------------------------------------
                                                  2000            2001
------------------------------------------------------------------------
Recorded investment in impaired loans:
      With recorded allowances              $  478,490      $   41,487
      Without recorded allowances            2,104,000       2,183,808
------------------------------------------------------------------------
        Total impaired loans                 2,582,490       2,225,295
        Related allowance for loan losses      303,490          41,487
------------------------------------------------------------------------
        Net impaired loans                  $2,279,000      $2,183,808
========================================================================

The activity with respect to loans to directors, officers and associates of such
persons, is as follows:

                                    Year Ended December 31,
--------------------------------------------------------------
                                                       2001
--------------------------------------------------------------
Balance, beginning                             $  2,491,024
Loans originated                                    838,863
Now associated                                      117,736
No longer associated                               (134,268)
Collection of principal                          (1,162,089)
--------------------------------------------------------------
Balance, ending                                $  2,151,266
==============================================================


                                                      PAMRAPO BANCORP, INC.   29

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


6.   PREMISES AND EQUIPMENT

                                        December 31,
---------------------------------------------------------
                                      2000         2001
---------------------------------------------------------
Land                            $  701,625   $  701,625
---------------------------------------------------------
Buildings and improvements       3,969,790    4,027,388
Less accumulated depreciation    1,557,073    1,686,978
---------------------------------------------------------
                                 2,412,717    2,340,410
---------------------------------------------------------
Leasehold improvements           1,590,555    1,590,555
Less accumulated amortization      414,534      573,690
---------------------------------------------------------
                                 1,176,021    1,016,865
---------------------------------------------------------
Furnishings and equipment        5,141,606    5,443,180
Less accumulated depreciation    4,389,374    4,671,345
---------------------------------------------------------
                                   752,232      771,835
---------------------------------------------------------
                                $5,042,595   $4,830,735
=========================================================


Depreciation expense for the years ended December 31, 1999, 2000 and 2001
totalled approximately $602,000, $561,000, and $571,000, respectively.

Depreciation charges are computed on the straight-line method over the
following estimated useful lives:

-------------------------------------------------------
Buildings and improvements          10 to 50 years
Leasehold improvements              10 years
Furnishings and equipment           3 to 10 years
-------------------------------------------------------

7.   INTEREST RECEIVABLE

                                                   December 31,
--------------------------------------------------------------------
                                                 2000         2001
--------------------------------------------------------------------
Loans, net of allowance for
   uncollected interest of approximately
   $197,000 and $136,000, respectively     $1,934,073   $2,126,962
Mortgage-backed securities                    739,100      711,617
Investment securities                          92,811      105,647
--------------------------------------------------------------------
                                           $2,765,984   $2,944,226
====================================================================

8.   DEPOSITS

<TABLE>
<CAPTION>
                                                               December 31,
------------------------------------------------------------------------------------------------------------
                                                 2000                                  2001
------------------------------------------------------------------------------------------------------------
                                 Weighted                              Weighted
                                  Average                               Average
                                     Rate          Amount    Percent       Rate          Amount    Percent
------------------------------------------------------------------------------------------------------------
<S>                                 <C>      <C>              <C>         <C>      <C>              <C>
Demand:
   Non-interest-bearing demand      0.00%    $ 23,807,691       6.27      0.00%    $ 26,247,595       6.30
   NOW                              2.00%      26,593,257       7.01      1.50%      32,335,151       7.76
------------------------------------------------------------------------------------------------------------
                                    1.06%      50,400,948      13.28      0.83%      58,582,746      14.06
Money Market                        3.00%      25,682,425       6.77      2.22%      28,292,792       6.79
Savings and club                    2.54%     114,433,105      30.16      2.33%     137,112,652      32.92
Certificates of deposit             5.83%     188,893,378      49.79      4.29%     192,598,605      46.23
------------------------------------------------------------------------------------------------------------
                                    4.01%    $379,409,856     100.00      3.02%    $415,586,795     100.00
============================================================================================================
</TABLE>


30   PAMRAPO BANCORP, INC.

<PAGE>

The scheduled maturities of certificates of deposit are as follows (in
thousands):

                                December 31,
------------------------------------------------
Maturity Period                2000       2001
------------------------------------------------
One year or less           $169,869   $164,029

After one to three years     17,418     25,811

After three years             1,606      2,759
------------------------------------------------
                           $188,893   $192,599
================================================

Certificates of deposit of $100,000 or more by the time remaining until maturity
are as follows (in thousands):

                                      December 31,
-----------------------------------------------------
Maturity Period                      2000      2001
-----------------------------------------------------
Three months or less              $16,621   $17,394

After three through six months     11,564    11,743

After six through twelve months    16,319    18,467

After twelve months                 4,830     8,231
-----------------------------------------------------
                                  $49,334   $55,835
=====================================================

A summary of interest on deposits follows:

                                       Year Ended December 31,
----------------------------------------------------------------------
                                    1999          2000          2001
----------------------------------------------------------------------
Demand                       $ 1,139,879   $ 1,225,308   $ 1,147,870

Savings and club               2,535,030     2,629,007     3,281,412

Certificates of deposit        8,290,513     9,923,003    10,490,771
----------------------------------------------------------------------
                              11,965,422    13,777,318    14,920,053

Less penalties for
   early withdrawal of
   certificates of deposit       (12,174)      (16,331)      (11,143)
----------------------------------------------------------------------
                             $11,953,248   $13,760,987   $14,908,910
======================================================================

9.   ADVANCES FROM FEDERAL
     HOME LOAN BANK OF NEW YORK

                                   December 31,
--------------------------------------------------------------------
                         2000                       2001
--------------------------------------------------------------------
                Weighted                   Weighted
Maturing         Average                    Average
by              Interest                   Interest
December 31,        Rate         Amount        Rate         Amount
--------------------------------------------------------------------
2001               5.10%   $    243,100          --   $         --

2002               6.51%      5,000,000       5.57%      8,000,000

2003               5.79%     20,340,000       5.50%     27,340,000

2004                  --             --       4.04%      5,000,000

2005                  --             --       4.54%      5,000,000

2006                  --             --       4.84%      5,000,000

2008                  --             --       4.85%      7,000,000

2010               6.19%     10,000,000       6.19%     10,000,000
--------------------------------------------------------------------
                   6.00%   $ 35,583,100       5.32%   $ 67,340,000
====================================================================

At December 31, 2000 and 2001, the advances were secured by pledges of the
Bank's investment in the capital stock of the Federal Home Loan Bank of New York
totalling $3,496,200, and $3,796,100 respectively, and a blanket assignment of
the Bank's unpledged qualifying mortgage loans, mortgage-backed securities and
investment securities portfolios.

10.  OTHER BORROWED MONEY

                                 December 31,
---------------------------------------------------------------
                         2000                    2001
---------------------------------------------------------------
                 Interest                Interest
                     Rate      Amount        Rate      Amount
---------------------------------------------------------------
Mortgage loan       8.00%   $ 204,962       8.00%   $ 178,176
===============================================================

The mortgage loan is payable in 144 equal monthly installments of $3,518 through
February 1, 2007 and is secured by premises with a carrying value of $397,000
and $1,370,000 at December 31, 2000 and 2001, respectively.


                                                      PAMRAPO BANCORP, INC.   31

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


11.  STOCK REPURCHASE PROGRAM

During the years ended December 31, 2000 and 2001, the Company repurchased
130,187 and 20,444 shares, respectively, of its own common stock, at prices
ranging from $19.13 to $21.88 and $20.25 to $25.10, respectively, per common
share, at a total cost of $2,703,475 and $416,145, respectively, under stock
repurchase programs approved by the Company's Board of Directors.

12.  REGULATORY CAPITAL

For the purpose of granting to eligible account holders a priority in the event
of future liquidation, the Bank, at the time of conversion, established a
special account in an amount equal to its total retained earnings of $18.4
million at June 30, 1989. In the event of a future liquidation of the converted
Bank (and only in such event), an eligible account holder who continues to
maintain his deposit account shall be entitled to receive a distribution from
the special account. The total amount of the special account is decreased (but
never increased) in an amount proportionately corresponding to decreases in the
deposit account balances of eligible account holders as of each subsequent year
end. After conversion, no dividends may be paid to stockholders if such
dividends would reduce the retained earnings of the converted Bank below the
amount required by the special account.

The Bank is subject to various regulatory capital requirements administered by
the banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by regulators
that, if undertaken, could have a direct material effect on the Bank. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of Total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier 1 capital to adjusted total assets (as defined). The following
tables present a reconciliation of capital per GAAP and regulatory capital and
information as to the Bank's capital levels at the dates presented:

                                              December 31,
--------------------------------------------------------------
                                            2000        2001
--------------------------------------------------------------
GAAP capital                            $ 40,730    $ 41,205

Less: Investment in and advances
        to non-includable subsidiary      (1,988)     (2,017)

      Unrealized (gain) on securities
        available for sale                   (74)       (196)
--------------------------------------------------------------
Core and tangible capital                 38,668      38,992

Add:  general valuation allowance          1,642       2,108
--------------------------------------------------------------
   Total regulatory capital             $ 40,310    $ 41,100
==============================================================


32   PAMRAPO BANCORP, INC.

<PAGE>

<TABLE>
<CAPTION>
                                                                        To Be Well
                                                                       Capitalized
                                                                       Under Prompt
                                                   Minimum Capital      Corrective
(Dollars in Thousands)              Actual          Requirements    Action Provisions
---------------------------------------------------------------------------------------
                                Amount    Ratio    Amount    Ratio    Amount    Ratio
---------------------------------------------------------------------------------------
December 31, 2000:
---------------------------------------------------------------------------------------
<S>                            <C>       <C>      <C>        <C>     <C>       <C>
Total Capital
  (to risk-weighted assets)    $40,310   16.29%   $19,797    8.00%   $24,746   10.00%
Tier 1 Capital
  (to risk-weighted assets)     38,668   15.63%        --       --    14,847    6.00%
Core (Tier 1) Capital
  (to adjusted total assets)    38,668    8.27%    18,713    4.00%    23,391    5.00%
Tangible Capital
  (to adjusted total assets)    38,668    8.27%     7,017    1.50%        --       --



December 31, 2001:
---------------------------------------------------------------------------------------
Total Capital
  (to risk-weighted assets)    $41,100   14.43%   $22,789    8.00%   $28,487   10.00%
Tier 1 Capital
  (to risk-weighted assets)     38,993   13.69%        --       --    17,092    6.00%
Core (Tier 1) Capital
  (to adjusted total assets)    38,993    7.26%    21,489    4.00%    26,861    5.00%
Tangible Capital
  (to adjusted total assets)    38,993    7.26%     8,058    1.50%        --       --
</TABLE>


As of September 30, 2001, the most recent notification from the Office of Thrift
Supervision, the Bank was categorized as well capitalized under the regulatory
framework for prompt corrective action. There are no conditions existing or
events which have occurred since notification that management believes have
changed the institution's category.


                                                      PAMRAPO BANCORP, INC.   33

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


13.  BENEFIT PLANS


PENSION PLAN ("PLAN")

The Bank has a non-contributory defined benefit pension plan covering all
eligible employees. The benefits are based on years of service and employees'
compensation. The Bank's funding policy is to contribute the maximum amount that
can be deducted for federal income tax purposes. The Plan's assets consist
primarily of mutual funds and bank deposits.

The following tables set forth the Plan's funded status and components of net
periodic pension cost:

                                               December 31,
----------------------------------------------------------------
                                           2000           2001
----------------------------------------------------------------

Change in Benefit Obligation

Benefit obligation -- beginning     $ 3,475,518    $ 3,730,084

   Service cost                         168,854        192,887

   Interest cost                        273,500        296,009

   Actuarial (gain) loss               (128,860)       352,452

   Benefits paid                        (58,928)      (100,725)
----------------------------------------------------------------
Benefit obligation -- ending        $ 3,730,084    $ 4,470,707
================================================================

Change in Plan Assets

Fair value of assets -- beginning   $ 2,967,836    $ 3,410,719

   Actual return on plan assets          60,029       (238,917)

   Employer contributions               441,782        337,531

   Benefits paid                        (58,928)      (100,725)
----------------------------------------------------------------
Fair value of assets -- ending      $ 3,410,719    $ 3,408,608
================================================================

Reconciliation of Funded Status

Accumulated benefit obligation      $ 2,979,323    $ 3,634,438
----------------------------------------------------------------
Projected benefit obligation        $ 3,730,084    $ 4,470,707

Fair value of assets                 (3,410,719)    (3,408,608)
----------------------------------------------------------------
Funded status                           319,365      1,062,099

Contributed in fourth quarter           (60,518)      (412,777)

Unrecognized net (loss)                (378,773)    (1,266,737)
----------------------------------------------------------------
(Prepaid) expense included in
   other assets                     $  (119,926)   $  (617,415)
================================================================


                                Year Ended December 31,
------------------------------------------------------------
                            1999         2000         2001
------------------------------------------------------------
Net Periodic Pension
   Expense

Service cost           $ 178,622    $ 168,854    $ 192,887

Interest cost            265,272      273,500      296,009

Expected return on
   assets               (262,404)    (259,404)    (297,851)

Amortization of
   unrecognized loss          --           --        1,256
------------------------------------------------------------
Net periodic pension
   expense             $ 181,490    $ 182,950    $ 192,301
============================================================

Assumptions used in the accounting for the Plan are as follows:

                                Year Ended December 31,
------------------------------------------------------------
                            1999         2000         2001
------------------------------------------------------------
Discount rate              8.00%        8.00%        8.00%

Rate of increase in
   compensation            5.00%        5.00%        5.00%

Long-term rate of return
   on plan assets          8.00%        8.50%        8.50%
============================================================

SAVINGS AND INVESTMENT PLAN ("SIP")

The Bank sponsors a SIP pursuant to Section 401(k) of the Internal Revenue Code,
for all eligible employees. Employees may elect to save up to 10% of their
compensation of which the Savings Bank will match 50% of the employee's
contribution. The SIP expense amounted to approximately, $116,000, $118,000 and
$106,000 for the years ended December 31, 1999, 2000 and 2001, respectively.


34   PAMRAPO BANCORP, INC.

<PAGE>

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("SERP")

The Bank has an unfunded non-qualified deferred retirement plan for certain
employees. A participant who retires at age 65 (the "Normal Retirement Age"), is
entitled to an annual retirement benefit equal to 75% of his compensation
reduced by his retirement plan annual benefits. Participants retiring before the
Normal Retirement Age receive the same benefits reduced by a percentage based on
years of service to the Bank and the number of years prior to the Normal
Retirement Age that participant retires.

The following tables set forth the SERP's funded status and components of net
periodic SERP cost:

                                                      December 31,
-----------------------------------------------------------------------
                                                  2000           2001
-----------------------------------------------------------------------
Projected benefit obligation - beginning   $ 1,947,825    $ 2,094,942

Interest cost                                  153,150        173,378

Actuarial (gain) loss                          (20,860)       153,493

Benefit payments                               (66,901)      (121,497)

Plan amendment                                  81,728        296,442
-----------------------------------------------------------------------
Projected benefit obligation - ending        2,094,942      2,596,758

Plan assets at fair value                           --             --
-----------------------------------------------------------------------
Projected benefit obligation in
   excess of plan assets                     2,094,942      2,596,758

Unrecognized net loss                         (518,147)      (622,887)

Unrecognized past service liability           (789,956)      (985,122)
-----------------------------------------------------------------------
Accrued SERP cost included in
   other liabilities                       $   786,839    $   988,749
=======================================================================

                                  Year Ended December 31,
------------------------------------------------------------
                                1999       2000       2001
------------------------------------------------------------
Net periodic SERP cost
   included the following
   components:

   Service cost             $     --   $     --   $     --

   Interest cost             132,727    153,150    173,378

   Net amortization          133,581    113,842    150,029
------------------------------------------------------------
   Net periodic SERP cost   $266,308   $266,992   $323,407
============================================================
   Contributions made       $ 66,901   $ 66,901   $121,497
============================================================

Assumptions used in the accounting for the SERP are as follows:

                        Year Ended December 31,
-------------------------------------------------
                           1999    2000    2001
-------------------------------------------------
Discount rate             8.00%   8.00%   7.25%

Rate of increase in
   compensation           5.50%   5.50%   4.50%

Amortization period
   (in years)             9.30    7.96    6.37
=================================================

14.  INCOME TAXES

The Bank qualifies as a savings institution under the provisions of the Internal
Revenue Code and was therefore, prior to January 1, 1996, permitted to deduct
from taxable income an allowance for bad debts based upon eight percent of
taxable income before such deduction, less certain adjustments. Retained
earnings at December 31, 2001, include approximately $6,907,000 of such bad
debt, which, in accordance with SFAS No. 109, "Accounting for Income Taxes," is
considered a permanent difference between the book and income tax basis of loans
receivable, and for which income taxes have not been provided. If such amount is
used for purposes other than for bad debt losses, including distributions in
liquidation, it will be subject to income tax at the then current rate.

The tax effects of existing temporary differences which give rise to significant
portions of deferred tax assets and deferred tax liabilities are as follows:

                                            December 31,
------------------------------------------------------------
                                         2000         2001
------------------------------------------------------------
Deferred tax assets
-------------------

Allowance for loan losses          $  677,165   $  772,503

Deferred loan fees                    233,042      174,844

Depreciation                           92,019      129,356

Reserve for uncollected interest       71,022       48,888

Benefit plans                         232,035      179,063

Other                                      --       26,948
------------------------------------------------------------
                                    1,305,283    1,331,602

Deferred tax liabilities
------------------------

Unrealized gain on securities
   available for sale                  41,300      110,200
------------------------------------------------------------
Net deferred tax assets            $1,263,983   $1,221,402
============================================================


                                                      PAMRAPO BANCORP, INC.   35

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The components of income taxes are summarized as follows:

                        Year Ended December 31,
------------------------------------------------------
                  1999           2000           2001
------------------------------------------------------
Current    $ 2,722,523    $ 2,587,330    $ 2,934,299

Deferred       (26,586)       (18,671)       (26,319)
------------------------------------------------------
           $ 2,695,937    $ 2,568,659    $ 2,907,980
======================================================

The following table presents a reconciliation between the reported income taxes
and the income taxes which would be computed by applying the normal federal
income tax rate of 34% to income before income taxes:

                                       Year Ended December 31,
-------------------------------------------------------------------
                                   1999         2000         2001
-------------------------------------------------------------------
Federal income tax           $2,520,376   $2,395,051   $2,688,850

Increases in income
   taxes resulting from:

   New Jersey savings
      institution tax, net
      of federal income
      tax effect                153,467      147,989      168,315

   Other items, net              22,094       25,619       50,815
-------------------------------------------------------------------
Effective income tax         $2,695,937   $2,568,659   $2,907,980
===================================================================

15.  COMMITMENTS AND CONTINGENCIES

The Bank is party to financial instruments with off-balance sheet risk in the
normal course of business primarily to meet the financing needs of its
customers. These financial instruments include commitments to originate loans
and purchase securities. The commitments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the
consolidated statement of financial condition. The Bank's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit is represented by the contractual
notional amount of those instruments. The Bank uses the same credit policies in
making commitments as it does for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since commitments may expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Savings Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank, upon extension of credit is based on management's credit evaluation of
the counterparty. Collateral held varies but primarily includes residential real
estate and income-producing commercial properties.

The Bank had loan commitments outstanding as follows:

                                 December 31,
--------------------------------------------------
                             2000           2001
--------------------------------------------------
To originate loans    $ 7,735,000    $27,097,000
==================================================

At December 31, 2001, all the outstanding commitments to originate loans are at
fixed interest rates which range from 6.125% to 9.875%. All commitments are due
to expire within ninety days.

At December 31, 2001, undisbursed funds from approved lines of credit under a
homeowners' equity and a commercial equity lending program amounted to
approximately $7,488,000 and $915,000, respectively. Unless they are
specifically cancelled by notice from the Bank, these funds represent firm
commitments available to the respective borrowers on demand. The interest rate
charged for any month on funds disbursed under these programs range from 1.00%
to 2.75% above the prime rate.

At December 31, 2001, the Bank was committed to purchase two 6.50% fixed rate
mortgage-backed securities for $5,914,000. These securities had an aggregate
principal balance of $5,860,000 and maturity dates of October and November 2021.


36   PAMRAPO BANCORP, INC.

<PAGE>

Rental expenses related to the occupancy of premises totalled $305,000, $306,000
and $312,000 for the years ended December 31, 1999, 2000 and 2001, respectively.
At December 31, 2001, minimum non-cancellable obligations under lease agreements
with original terms of more than one year are as follows:

December 31,                        Amount
--------------------------------------------
2002                           $   270,000

2003                               243,000

2004                               227,000

2005                               230,000

2006                               234,000

Thereafter                         594,000
--------------------------------------------
                               $ 1,798,000
============================================

The Bank is also a party to litigation which arises primarily in the ordinary
course of business. In the opinon of management, the ultimate disposition of
such litigation should not have a material effect on the consolidated financial
position of the Company.

16.  FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts and fair value of the financial instruments are as follows
(in thousands):

<TABLE>
<CAPTION>
                                                             December 31,
-----------------------------------------------------------------------------------------
                                                      2000                  2001
-----------------------------------------------------------------------------------------
                                              Carrying       Fair   Carrying       Fair
(In Thousands)                                   Value      Value      Value      Value
-----------------------------------------------------------------------------------------
<S>                                           <C>        <C>        <C>        <C>
Financial Assets
-----------------------------------------------------------------------------------------
Cash and cash equivalents                     $ 14,254   $ 14,254   $ 22,689   $ 22,689

Securities available for sale                    5,713      5,713      5,304      5,304

Investment securities held to maturity           6,996      6,886      5,000      5,017

Mortgage-backed securities held to maturity    118,791    119,328    122,418    124,578

Loans receivable                               309,082    311,516    369,239    371,477

Interest receivable                              2,766      2,766      2,944      2,944

Financial Liabilities
-----------------------------------------------------------------------------------------
Deposits                                       379,410    381,038    416,587    418,319

Advances and other borrowed money               35,788     35,741     67,518     68,109

Commitments
-----------------------------------------------------------------------------------------
To originate loans                               7,735      7,735     27,097     27,097

Unused lines of credit                           4,197      4,197      8,403      8,403

To purchase securities                              --         --      5,914      5,914
</TABLE>


                                                      PAMRAPO BANCORP, INC.   37

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


The fair value estimates are made at a discrete point in time based on relevant
market information and information about the financial instruments. Fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates. Further, the foregoing estimates may not reflect the actual
amount that could be realized if all or substantially all of the financial
instruments were offered for sale.

In addition, the fair value estimates were based on existing on-and-off balance
sheet financial instruments without attempting to value anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not
considered financial assets and liabilities include mortgage servicing rights,
premises and equipment and advances from borrowers for taxes and insurance. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be
likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for
many of the financial instruments. This lack of uniform valuation methodologies
introduces a greater degree of subjectivity to these estimated fair values.

17.  PARENT COMPANY FINANCIAL INFORMATION

The following condensed financial statements of the Company should be read in
conjunction with the Notes to Consolidated Financial Statements.


STATEMENTS OF FINANCIAL CONDITION

                                                   December 31,
---------------------------------------------------------------------
Assets                                         2000            2001
---------------------------------------------------------------------
Cash and cash equivalents              $  5,674,118    $  6,121,603

Investment in subsidiary                 40,728,419      41,204,870

Refundable income taxes                      24,717         111,836

Other assets                                190,059         187,866
---------------------------------------------------------------------
   Total assets                        $ 46,617,313    $ 47,626,175
=====================================================================


Liabilities and stockholders' equity

Liabilities

Other liabilities                      $     88,804    $    103,000
---------------------------------------------------------------------
   Total liabilities                         88,804         103,000
=====================================================================


Stockholders' equity

Common stock                                 34,500          34,500

Paid-in-capital in excess of
   par value                             18,906,768      18,906,768

Retained earnings - substantially
   restricted                            46,406,029      47,816,840

Treasury stock, at cost                 (18,818,788)    (19,234,933)
---------------------------------------------------------------------
   Total stockholders' equity            46,528,509      47,523,175
---------------------------------------------------------------------
   Total liabilities and
      stockholders' equity             $ 46,617,313    $ 47,626,175
=====================================================================


38   PAMRAPO BANCORP, INC.

<PAGE>

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
--------------------------------------------------------------------------------------------
                                                        1999           2000           2001
--------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>
Dividends from subsidiary                        $ 5,000,000    $ 7,000,000    $ 5,000,000
Interest income                                        5,427          6,139          5,306
--------------------------------------------------------------------------------------------
   Total income                                    5,005,427      7,006,139      5,005,306
Expenses                                             404,117        392,540        470,761
--------------------------------------------------------------------------------------------
Income before equity in undistributed earnings
   of subsidiary and income taxes (benefit)        4,601,310      6,613,599      4,534,545
Equity in undistributed earnings of subsidiary        (2,726)    (2,250,305)       354,260
--------------------------------------------------------------------------------------------
Income before income taxes (benefit)               4,598,584      4,363,294      4,888,805
Income taxes (benefit)                              (118,350)      (112,316)      (111,596)
--------------------------------------------------------------------------------------------
Net income                                       $ 4,716,934    $ 4,475,610    $ 5,000,401
============================================================================================
</TABLE>



STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
--------------------------------------------------------------------------------------------------
                                                              1999           2000           2001
--------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>
Cash flows from operating activities:

Net income                                             $ 4,716,934    $ 4,475,610    $ 5,000,401

Adjustments to reconcile net income to net
   cash provided by operating activities:

      Equity in undistributed earnings of subsidiary         2,726      2,250,305       (354,260)

      (Increase) decrease in refundable income taxes       (45,672)        93,833        (87,119)

      Decrease (increase) in other assets                      994        (21,081)         2,193

      Increase (decrease) in other liabilities             311,068       (307,762)        14,196
--------------------------------------------------------------------------------------------------
         Net cash provided by operating activities       4,986,050      6,490,905      4,575,411
--------------------------------------------------------------------------------------------------
Cash flows from financing activities:

   Cash dividends paid                                  (3,459,907)    (3,618,057)    (3,711,781)

   Purchase of treasury stock                           (2,689,379)    (2,703,475)      (416,145)
--------------------------------------------------------------------------------------------------
         Net cash (used in) financing activities        (6,149,286)    (6,321,532)    (4,127,926)
--------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents    (1,163,236)       169,373        447,485

Cash and cash equivalents - beginning                    6,667,981      5,504,745      5,674,118
--------------------------------------------------------------------------------------------------
Cash and cash equivalents - ending                     $ 5,504,745    $ 5,674,118    $ 6,121,603
==================================================================================================
</TABLE>


                                                      PAMRAPO BANCORP, INC.   39

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


18.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
(In Thousands, except for per share amounts)       First      Second       Third      Fourth
Year Ended December 31, 2000                     Quarter     Quarter     Quarter     Quarter
----------------------------------------------------------------------------------------------
<S>                                               <C>         <C>         <C>         <C>
Interest income                                   $8,108      $8,169      $8,322      $8,563

Interest expense                                   3,626       3,701       3,919       4,252
----------------------------------------------------------------------------------------------
   Net interest income                             4,482       4,468       4,403       4,311

Provision for loan losses                             60          60          60          28

Non-interest income                                  379         370         379         448

Non-interest expenses                              3,104       3,048       3,038       2,798

Income taxes                                         612         633         612         711
----------------------------------------------------------------------------------------------
Net income                                        $1,085      $1,097      $1,072      $1,222
==============================================================================================
Basic/diluted earnings per common share           $ 0.40      $ 0.42      $ 0.41      $ 0.47
==============================================================================================
Dividends per common share                        $0.345      $0.345      $0.345      $0.345
==============================================================================================
</TABLE>


<TABLE>
<CAPTION>
(In Thousands, except for per share amounts)       First      Second       Third      Fourth
Year Ended December 31, 2001                     Quarter     Quarter     Quarter     Quarter
----------------------------------------------------------------------------------------------
<S>                                               <C>         <C>         <C>         <C>
Interest income                                   $8,777      $8,928      $9,429      $9,491

Interest expense                                   4,461       4,488       4,474       4,121
----------------------------------------------------------------------------------------------
   Net interest income                             4,316       4,440       4,955       5,370

Provision for loan losses                             60          60         150         189

Non-interest income                                  443         392         458         628

Non-interest expenses                              3,046       3,150       3,256       3,183

Income taxes                                         609         599         736         964
----------------------------------------------------------------------------------------------
Net income                                        $1,044      $1,023      $1,271      $1,662
==============================================================================================
Basic/diluted earnings per common share           $ 0.40      $ 0.40      $ 0.49      $ 0.65
==============================================================================================
Dividends per common share                        $0.360      $0.360      $0.360      $0.360
==============================================================================================
</TABLE>


40   PAMRAPO BANCORP, INC.

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
Pamrapo Bancorp, Inc.

We have audited the consolidated statements of financial condition of Pamrapo
Bancorp, Inc. (the "Company") and Subsidiaries as of December 31, 2000 and 2001,
and the related consolidated statements of income, comprehensive income, changes
in stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the above mentioned consolidated financial statements present
fairly, in all material respects, the financial position of Pamrapo Bancorp,
Inc. and Subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.




                                       /s/ Radics & Co., LLC
February 15, 2002
Pine Brook, New Jersey


                                                      PAMRAPO BANCORP, INC.   41

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL CONDITION
AND OTHER DATA OF THE COMPANY


<TABLE>
<CAPTION>
                                                        At December 31,
------------------------------------------------------------------------------------------
(Dollars in thousands)                  1997       1998       1999       2000       2001
------------------------------------------------------------------------------------------
<S>                                 <C>        <C>        <C>        <C>        <C>
Financial Condition Data:
Total amount of:
Assets                              $376,714   $413,474   $448,020   $469,558   $539,639
Loans receivable                     211,156    239,010    268,280    309,082    369,239
Securities available for sale         11,849      9,652      6,429      5,713      5,304
Mortgage-backed securities           126,109    120,400    120,824    118,791    122,418
Investment securities                     --      1,998      7,996      6,996      5,000
Deposits                             307,472    325,985    361,925    379,410    416,587
Advances and other borrowed money     13,857     28,836     30,813     35,788     67,518
Stockholders' equity                  48,533     49,773     48,254     46,529     47,523
</TABLE>


<TABLE>
<CAPTION>
                                                   Year Ended December 31,
-----------------------------------------------------------------------------------------
(Dollars in thousands)                 1997       1998       1999       2000       2001
-----------------------------------------------------------------------------------------
<S>                                 <C>        <C>        <C>        <C>        <C>
Operating Data:
Interest income                     $28,396    $28,971    $31,253    $33,162    $36,625
Interest expense                     11,862     12,428     13,642     15,498     17,544
-----------------------------------------------------------------------------------------
Net interest income                  16,534     16,543     17,611     17,664     19,081
Provision for loan losses               586        292        299        208        459
Non-interest income                   1,674      1,399      1,565      1,576      1,921
Non-interest expenses                 9,792     10,812     11,464     11,988     12,635
Income taxes                          2,759      2,443      2,696      2,568      2,908
-----------------------------------------------------------------------------------------
Net income                          $ 5,071    $ 4,395    $ 4,717    $ 4,476    $ 5,000
=========================================================================================
Net income per share
   Basic                            $  1.74    $  1.55    $  1.70    $  1.70    $  1.94
   Diluted                             1.74       1.55       1.70       1.70       1.94
=========================================================================================
Dividends per share                 $  1.00    $  1.12    $  1.25    $  1.38    $  1.44
=========================================================================================
Dividend payout ratio                 57.58%     72.45%     73.35%     80.84%     74.23%
=========================================================================================
</TABLE>


                                                      PAMRAPO BANCORP, INC.   43

<PAGE>

PAMRAPO BANCORP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL CONDITION
AND OTHER DATA OF THE COMPANY (continued)


<TABLE>
<CAPTION>
                                              At or For Year Ended December 31,
-------------------------------------------------------------------------------------
                                           1997     1998     1999     2000     2001
-------------------------------------------------------------------------------------
<S>                                      <C>      <C>      <C>      <C>      <C>
Selected Financial Ratios:
Return on average assets                  1.37%    1.13%    1.09%    0.99%    0.99%
Return on average equity                 10.34%    8.96%    9.66%    9.57%   10.70%
Average equity/average assets            13.28%   12.64%   11.29%   10.30%    9.24%
Interest rate spread                      4.17%    3.91%    3.76%    3.57%    3.48%
Net yield on average
   interest-earning assets                4.72%    4.49%    4.28%    4.08%    3.95%
Non-interest expenses to
   average assets                         2.65%    2.79%    2.65%    2.64%    2.50%
Equity/total assets                      12.88%   12.04%   10.77%    9.91%    8.81%
Capital ratios:
      Tangible                           11.67%   10.05%    9.30%    8.27%    7.26%
      Core                               11.67%   10.05%    9.30%    8.27%    7.26%
      Risk-based                         25.15%   21.23%   19.52%   16.29%   14.43%
Non-performing loans to
   total assets                           1.84%    1.11%    0.94%    0.87%    0.60%
Non-performing loans to
   loans receivable                       3.27%    1.92%    1.57%    1.30%    0.88%
Non-performing assets to
   total assets                           2.20%    1.40%    1.03%    1.00%    0.65%
Allowance for loan losses
   to non-performing loans               36.23%   50.00%   47.62%   47.74%   65.95%
Average interest-earning
   assets/average interest-bearing
   liabilities                            1.16x    1.17x    1.16x    1.15x    1.13x
Net interest income after
   provision for loan losses
   to non-interest expenses               1.63x    1.50x    1.51x    1.46x    1.47x
</TABLE>


44   PAMRAPO BANCORP, INC.